A new CIBC report has found that as of the third quarter of 2020, Canadians have stockpiled more than $170 billion in surplus cash.
With the COVID-19 pandemic imposing a hard stop on much of the nation’s economic activity, households are holding on to an estimated $90 billion, which represents around 4% of consumer spending. The household savings rate stood at 13% in Q3, considerably higher than the 3.6% rate recorded prior to the pandemic.
“We’re seeing a situation where the savings rate is going up, spending went down dramatically, but income actually went up because of government support and the fact that many people did not see their income going down,” said Benjamin Tal, deputy chief economist at CIBC.
“We're in a very weird situation in which the economy is down, but the level of cash in the economy is rising,” Tal told BNN Bloomberg. “Maybe [a vaccine] will be the green light for people to actually start redeploying the mountain of cash they’re sitting on.”
More than $80 billion remains idle in Canadian businesses. Federal fiscal assistance programs have pumped significant amounts into these reserves, CIBC reported.
“I think a lot of this cash is held by companies and sectors that are not impacted directly by the crisis. In fact, they’re benefiting from it,” Tal said. “At the same time, they’re not in the mood to invest when the economy is down, so they’re sitting on this cash – waiting, looking for direction – and this cash will be utilized the minute they see the light because it’s really sub-optimal for them … not to invest.”